Bank Secrecy Act & Anti-Money Laundering Program Training 2011 for website.ppt

7/27/2019 Bank Secrecy Act & Anti-Money Laundering Program Training 2011 for website.ppt

1/51

Bank Secrecy Act &

Anti-MoneyLaundering Program

Central Virginia Chapter

Annual Training Session2011
http://www.google.com/imgres?imgurl=http://www.ncua.gov/dataservices/DownloadDataIndex_Files/NCUA%2520Logo/2%2520in%2520NCUA%2520BLUE%2520LOGO/600Px%2520NCUA%2520B%2520LOGO.png&imgrefurl=http://www.ncua.gov/dataservices/IndexDownloadData.aspx&usg=__pQmM32Xmhb70Xt9dGP7gbyqWeiw=&h=598&w=600&sz=163&hl=en&start=2&sig2=uNrXxpqZsaJEuUS4DHLi_Q&zoom=1&itbs=1&tbnid=A0mKRWAxaN2A4M:&tbnh=135&tbnw=135&prev=/images%3Fq%3DNCUA%2Blogo%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=61ynTfD1I4m-0QHEtsz5CAhttp://www.google.com/imgres?imgurl=http://nationalmortgageprofessional.com/sites/default/files/images/FFIECLogo_0.gif&imgrefurl=http://nationalmortgageprofessional.com/content/ffiec-logo-0&usg=__Xwfwam9kuiEjRnmKWDLLC24cImg=&h=126&w=196&sz=14&hl=en&start=10&sig2=wZ1girY6S8Ra4UjvozFmTQ&zoom=0&itbs=1&tbnid=rAmLJ0fegjfjxM:&tbnh=67&tbnw=104&prev=/images%3Fq%3DFFIEC%2Blogo%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=sFynTe3pFqnz0gGZsoz-CQ


2/51

Primary Information Sources

www.fincen.gov

31 CFR Chapter XBSAs new home. As of

March 1, 2011 the BSA has moved from 31CFR 103 to its new home in Chapter X.

FFIEC BSA Examiners Manual

NCUA ARIES Exam Questionnaire
http://www.fincen.gov/http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?sid=0e5f6b55b62248a15f8ba11d1c561443&c=ecfr&tpl=/ecfrbrowse/Title31/31cfrv3_02.tplhttp://www.ffiec.gov/bsa_aml_infobase/default.htmhttp://www.ncua.gov/Resources/CreditUnionResources/aries/index.aspxhttp://www.ncua.gov/Resources/CreditUnionResources/aries/index.aspxhttp://www.ffiec.gov/bsa_aml_infobase/default.htmhttp://ecfr.gpoaccess.gov/cgi/t/text/text-idx?sid=0e5f6b55b62248a15f8ba11d1c561443&c=ecfr&tpl=/ecfrbrowse/Title31/31cfrv3_02.tplhttp://www.fincen.gov/


3/51

BSA/AML Legislative History

A group of laws designed to assist the governmentin its efforts to monitor, prevent, and prosecutemoney laundering and other financial crimes.

1970Bank Secrecy Act (aka Currency & Foreign

Transactions ActEstablished recordkeeping andreporting requirements for individuals and financialinstitutions.

1986Money Laundering Control ActImposedcriminal liability on individuals and financial

institutions that knowingly support or assist in moneylaundering activities. Required the establishment ofprograms to monitor and report such activities.

1990Financial Crimes Enforcement Network(FinCEN) is created.


4/51

BSA/AML Legislative History

1992Annunzio-Wylie Anti-MoneyLaundering ActStrengthened sanctions andTreasurys enforcement role.

1994Money Laundering Suppression ActFurther enhanced Treasurys enforcementrole.

1996The development of the SuspiciousActivity Report.

2001USA PATRIOT ActResponse to theterrorist attacks of 9/11. Uniting and Strengthening America by Providing

Appropriate Tools Required to Intercept andObstruct Terrorism


5/51

BSA/AML Basics

A policy approved by Board of Directors Must be commensurate with an institutions BSA/AML risk

level

Must be reviewed and approved annually

A regular periodic BSA/AML risk assessment(generally performed annually)

Annual independent review of the credit unionsBSA/AML compliance program Can be conducted by in-house personnel, if independent

from BSA/AML processes (e.g. Supervisory Committee)

Can be conducted by outside audit firm or League staff


6/51

BSA/AML Basics

An individual designated as BSA ComplianceOfficer

Must be provided the tools and training toeffectively manage the institutions BSA/AMLprogram

Must be in a position of authority sufficient tomanage the BSA/AML program

Annual training for all staff and volunteers asappropriate for job duties and responsibilities


7/51

BSA/AML Basics

Internal policies, procedures, and controls to ensurecompliance with all aspects of the BSA/AML laws.

Transaction Monitoring & Information Reporting

Currency Transaction Reports Suspicious Activity Reports

Monetary Instrument Log

PATRIOT ACT Section 314(a)

Member Identification Requirements PATRIOT ACT Section 326

Customer (Member) Due Diligence

Record Retention Requirements


8/51

BSA/AML Basics

Enforcement by Financial Crimes EnforcementNetwork (FinCEN), an agency of the TreasuryDepartment

Regulatory oversight by NCUA and BFI, dependingon charter type. Often the NCUA will take the leadon BSA examinations even in state-chartered creditunions for reasons of safety and soundness

Penalties can be civil, criminal, or both and mayrange from $500 into the millions for specific andsystemic BSA violations


9/51

Recent Enforcement Actions

Pacific National Bank - $355,000,000 inassets, bank owned by the government ofEcuador

Ordered to pay Civil Money Penalty of $7,000,000for failure to:

Adequately identify, monitor, and report suspiciousactivity

Conduct sufficient due diligence

Adequately audit high risk areas and transactions


10/51


Zions First National Bank - $56,000,000,000in assets

Ordered to pay $8,000,000 penalty for:

Failure to implement effective AML program withregard to foreign accounts

Failure to establish internal policies and controls

Failure to designate individual responsible for day-to-day compliance with BSA/AML rules


11/51


Pamrapo Savings Bank$593,000,000 inassets

Forfeited $5,000,000 to US Government and

Ordered to pay penalty of $1,000,000 for:

Failure to maintain and effective BSA/AML programincluding:

Lack of internal controls

Unqualified BSA personnel

Lack of training

Deficient independent testing


12/51

BSA/AML Policy & Program

Each credit union is required to have a compliance program thatincludes:

a system of internal controls to ensure ongoing compliance

testing for compliance by the credit union or outside party

a compliance officer responsible for monitoring day-to-daycompliance

training for appropriate employees.

The written BSA compliance policies and procedures should be

updated to reflect changes in the credit unions BSA riskassessment as well as any changes to the regulations.

NCUA ARIES Exam Questionnaire


13/51

Risk Assessment

The credit unions risk assessment should consider the followingfactors during the risk identification process:

Customers Products

Services Geographic locations

The risk assessment should be periodically reviewed and updated,particularly when new products, services, members and geographiclocations are added.

The risk assessment process should determine the credit unionsinherent risk (quantity of risk), how internal controls mitigate (reduce)risk exposure, and whether the remaining level of risk exposure isappropriate for the credit union. While fully offsetting all BSA/AMLrisk would be prohibitively expensive for most financial institutions,

there should be a reasonable relationship between the level ofunmitigated risk and resources devoted to BSA/AML.NCUA ARIES Exam Questionnaire


14/51

Currency Transaction Reports

Report all currency transactions over $10,000

Must be filed within 25 days of the transaction

Report must include:

Name

Social Security Number & ID number

Physical address

Occupation

Date of transaction

Type of transaction

Amount of transaction(s) rounded up to nearest dollar


15/51

CTR Continued

Deposits aggregated for any business day

Withdrawals aggregated for any business day

Deposits and withdrawals NOTaggregated

All joint owners of an account into which a deposit ismade must appear on the CTR.

True also for businesses. All beneficial owners of thebusiness should appear on the CTR.

A recent conversation with FinCEN revealed that forwithdrawals from joint accounts only the member weknow will benefit must appear on the CTR.


16/51

CTR Filing Exemptions

Automatically exempt, no paperwork necessary:

Financial institutions operating in the US

Federal or state governments

Entities acting with governmental authority Filing of Designation of Exempt Person form and

annual review required:

Entities traded on major exchanges

Non-listed businesses Payroll customers


17/51

Exemption Criteria

Entities listed on major national exchanges must beexempted using a form DOEP. An annual review ofeligibility must be conducted and suspicious activitymonitoring is still required

Non listed businesses must meet the following: Conduct at least 5 reportable transactions per year Maintain an account for two months (less if based on

detailed risk analysis No more than 50% of gross income from prohibited

activities File DOEP Annual review of eligibility Ongoing suspicious activity monitoring and reporting


18/51

Prohibited Activities

Serving as a financialinstitution or agents of afinancial institution

Purchase or sale of motor

vehicles, aircraft, or farmequipment

Chartering of ships, buses,or aircraft

Gaming of any kind (exceptlicensed parimutuel bettingat race tracks)

Auctioning of goods

Practice of law,accountancy, or medicine

Investment advisoryservices & banking

Real estate brokerage

Pawn brokerage

Title insurance and realestate closing services

Trade union activities


19/51

Suspicious Activity Report

Credit unions are required to file SuspiciousActivity Reports under the followingconditions:

Insider abuse of any amount Any Federal criminal violations of $5,000 or

greater when a suspect can be identified

Any Federal criminal violations of $25,000 when a

suspect cannot be identified Computer IntrusionTell the govt if someone tries to steal your treats!
http://www.google.com/imgres?imgurl=http://3.bp.blogspot.com/_frdFfbyVDwQ/Sg1xdsFp5wI/AAAAAAAAB9M/ecWEF3xHt8E/s400/pug0407.jpg&imgrefurl=http://leavingandloving.blogspot.com/2009/05/pug-friday.html&usg=__aoHvOll_ZxJ_OitzxNqLyjPFSA0=&h=382&w=400&sz=34&hl=en&start=17&sig2=GGj0qtVZdnqB6oCd29Qijg&zoom=1&itbs=1&tbnid=1LPkRWWuSioecM:&tbnh=118&tbnw=124&prev=/images%3Fq%3Dmoving%2Bpugs%26hl%3Den%26sa%3DN%26gbv%3D2%26ndsp%3D20%26tbm%3Disch&ei=J6-kTaiyLMXUgQe8__3HCAhttp://2.bp.blogspot.com/_xCZXXM23n7k/TMB0uqQagFI/AAAAAAAAB0I/EHss7fI6lGY/s1600/Halloween.jpg


20/51

Suspicious Activity Report

Transactions of $5,000 or more involving potentialmoney laundering and/or Bank Secrecy Act

violations if: The credit union knows, suspects, or has reason to

suspect that:

The transaction involves funds from illegal activities and isdesigned to hide or disguise the true nature of the funds

The transaction is designed to avoid BSA reporting

The transaction has no apparent business purpose andcannot be adequately explained by investigation

Things are not always what they seem!
http://2.bp.blogspot.com/_xCZXXM23n7k/TMB0uqQagFI/AAAAAAAAB0I/EHss7fI6lGY/s1600/Halloween.jpg


21/51

Suspicious Activity Report -Timing

If a suspect is identified30 days from thedate activity is determined to be suspicious

If no suspect was identified60 days fromthe date activity is determined to besuspicious.

If the activity giving rise to the SAR

continues, new SARs must be filed every 90days

Always keep an eye out for suspicious activity!
http://www.google.com/imgres?imgurl=http://motherjones.com/files/legacy/news/exhibit/2008/03/petophilia-smug-pug.jpg&imgrefurl=http://motherjones.com/politics/2008/03/petophilia&usg=__fyuYdwwhFhL_PctZc4MwaF3Tc1k=&h=113&w=150&sz=6&hl=en&start=80&sig2=CbVxB1bkO4RoT_VK1Fko8w&zoom=1&itbs=1&tbnid=cAyuPzwETVKuZM:&tbnh=72&tbnw=96&prev=/images%3Fq%3Dmoving%2Bpugs%26start%3D60%26hl%3Den%26sa%3DN%26gbv%3D2%26ndsp%3D20%26tbm%3Disch&ei=_a6kTYymBYbpgQfE_ZG6CA


22/51

SAR Examples

A business member who suddenly starts making large cash deposits. A member who asks about the limit on filing a CTR report and then

makes a transaction for an amount just under $10,000.00. A member who frequently exchanges small bills for large bills. Frequent cash deposits under $10,000 into accounts with low average

balances. ATM cash deposits that are below the specified threshold. Businesses that do not normally generate cash in normal course of

operation, making numerous cash transactions. An unusual cash deposit for a member given their account history and

activity. The transaction has no business purpose or apparent lawful purpose or

is not one that the member would normally be engaged in and the CreditUnion knows of no reasonable explanation for the transaction afterexamining all available facts.

Loan fraud, including large payment amounts, lies on loan applications,mortgage (both residential and business) loan fraud
http://www.google.com/imgres?imgurl=http://www.aforadio.com/wp-content/uploads/2011/02/TOP-SECRET.jpeg&imgrefurl=http://www.aforadio.com/index.php/top-secret-the-single-step-to-better-bonding-with-your-kid-aforadio-com/&usg=__2A249hxCTm7A_6ifAZEDbpU5THw=&h=456&w=753&sz=137&hl=en&start=18&sig2=dFqr4ZpCgwAQxi8AQjkBnQ&zoom=1&itbs=1&tbnid=7af1xNUq7jcifM:&tbnh=86&tbnw=142&prev=/images%3Fq%3DTop%2BSecret%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=A02vTZD6C4PKgQfd6ZyNDQ


23/51

SARs AreSecret!

The filing and content of SARs are to beconsidered secret. The Bank Secrecy Actregulations prohibit the disclosure of the

existence and/or content of any SAR filing.

Discussions within the credit union should belimited to those with a direct involvement in

the identification of the activity or thepreparation of the SAR.
http://www.google.com/imgres?imgurl=http://www.aforadio.com/wp-content/uploads/2011/02/TOP-SECRET.jpeg&imgrefurl=http://www.aforadio.com/index.php/top-secret-the-single-step-to-better-bonding-with-your-kid-aforadio-com/&usg=__2A249hxCTm7A_6ifAZEDbpU5THw=&h=456&w=753&sz=137&hl=en&start=18&sig2=dFqr4ZpCgwAQxi8AQjkBnQ&zoom=1&itbs=1&tbnid=7af1xNUq7jcifM:&tbnh=86&tbnw=142&prev=/images%3Fq%3DTop%2BSecret%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=A02vTZD6C4PKgQfd6ZyNDQhttp://www.google.com/imgres?imgurl=http://www.aforadio.com/wp-content/uploads/2011/02/TOP-SECRET.jpeg&imgrefurl=http://www.aforadio.com/index.php/top-secret-the-single-step-to-better-bonding-with-your-kid-aforadio-com/&usg=__2A249hxCTm7A_6ifAZEDbpU5THw=&h=456&w=753&sz=137&hl=en&start=18&sig2=dFqr4ZpCgwAQxi8AQjkBnQ&zoom=1&itbs=1&tbnid=7af1xNUq7jcifM:&tbnh=86&tbnw=142&prev=/images%3Fq%3DTop%2BSecret%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=A02vTZD6C4PKgQfd6ZyNDQ


24/51

SAR Resources

www.fincen.gov

SAR Narrative Guidance

SAR Tips and Trends

SAR Powerpoint Presentation
http://www.fincen.gov/http://www.fincen.gov/


25/51

Money Services Businesses(MSBs)

Currency dealer or exchanger Check Casher Issuer of travelers checks, money orders, stored

value Seller or redeemer of travelers checks, money

orders, stored value Money transmitter All except money transmitters subject to $1,000 for

any person on any day rule. All money transmittersare MSBs regardless of activity level day = business day = day communicated to

members that their transactions will normally post


26/51

Why We Care About MSBs

FinCEN requires all MSBs to be registered

If an MSB is not registered and is a memberof your credit union you have a SAR filingresponsibility.

Check the MSB list athttp://www.fincen.gov/financial_institutions/m

sb/msbstateselector.html
http://www.fincen.gov/financial_institutions/msb/msbstateselector.htmlhttp://www.fincen.gov/financial_institutions/msb/msbstateselector.htmlhttp://www.fincen.gov/financial_institutions/msb/msbstateselector.htmlhttp://www.fincen.gov/financial_institutions/msb/msbstateselector.html


27/51

Monetary Instrument Log

Record all cash purchases of cashiers checks, travelers checksand money orders in the amounts of $3,000 - $10,000

Required info: Name Address Date of Birth ID # Amount of transaction Type of instrument Number of instrument Date of purchase

Most credit unions do not have to keep a physical log becausethey do not offer these products to non-members. If you do, youwill probably need to keep a log.


28/51

PATRIOT ACT 314(a)

Requires financial institutions to respond to periodicrequests for account/member information from theinternational law enforcement community.

Credit unions must: Identify an employee as the 314(a) point of contact. This

person is listed as such on the 5300.

Compare the 314(a) biweekly list against the CUs

membership. Any matches must be communicated to therequesting officer/agent within 12 days of the request.
http://www.google.com/imgres?imgurl=http://cci-inspection.com/cci/images/stories/detective.jpg&imgrefurl=http://cci-inspection.com/cci/index.php%3Foption%3Dcom_content%26task%3Dview%26id%3D28%26Itemid%3D40&usg=__YGXglP0DcZrIs3rs15P6_20-pWQ=&h=362&w=490&sz=40&hl=en&start=1&sig2=qMGEMmOtr9jPpVHk2xFwEQ&zoom=1&itbs=1&tbnid=hahsojcaY228fM:&tbnh=96&tbnw=130&prev=/images%3Fq%3Ddetective%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=v0mnTcDwKaiU0QGXl-X5CAhttp://www.google.com/imgres?imgurl=http://cci-inspection.com/cci/images/stories/detective.jpg&imgrefurl=http://cci-inspection.com/cci/index.php%3Foption%3Dcom_content%26task%3Dview%26id%3D28%26Itemid%3D40&usg=__YGXglP0DcZrIs3rs15P6_20-pWQ=&h=362&w=490&sz=40&hl=en&start=1&sig2=qMGEMmOtr9jPpVHk2xFwEQ&zoom=1&itbs=1&tbnid=hahsojcaY228fM:&tbnh=96&tbnw=130&prev=/images%3Fq%3Ddetective%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=v0mnTcDwKaiU0QGXl-X5CAhttp://www.google.com/imgres?imgurl=http://cci-inspection.com/cci/images/stories/detective.jpg&imgrefurl=http://cci-inspection.com/cci/index.php%3Foption%3Dcom_content%26task%3Dview%26id%3D28%26Itemid%3D40&usg=__YGXglP0DcZrIs3rs15P6_20-pWQ=&h=362&w=490&sz=40&hl=en&start=1&sig2=qMGEMmOtr9jPpVHk2xFwEQ&zoom=1&itbs=1&tbnid=hahsojcaY228fM:&tbnh=96&tbnw=130&prev=/images%3Fq%3Ddetective%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=v0mnTcDwKaiU0QGXl-X5CAhttp://www.google.com/imgres?imgurl=http://cci-inspection.com/cci/images/stories/detective.jpg&imgrefurl=http://cci-inspection.com/cci/index.php%3Foption%3Dcom_content%26task%3Dview%26id%3D28%26Itemid%3D40&usg=__YGXglP0DcZrIs3rs15P6_20-pWQ=&h=362&w=490&sz=40&hl=en&start=1&sig2=qMGEMmOtr9jPpVHk2xFwEQ&zoom=1&itbs=1&tbnid=hahsojcaY228fM:&tbnh=96&tbnw=130&prev=/images%3Fq%3Ddetective%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=v0mnTcDwKaiU0QGXl-X5CAhttp://www.google.com/imgres?imgurl=http://cci-inspection.com/cci/images/stories/detective.jpg&imgrefurl=http://cci-inspection.com/cci/index.php%3Foption%3Dcom_content%26task%3Dview%26id%3D28%26Itemid%3D40&usg=__YGXglP0DcZrIs3rs15P6_20-pWQ=&h=362&w=490&sz=40&hl=en&start=1&sig2=qMGEMmOtr9jPpVHk2xFwEQ&zoom=1&itbs=1&tbnid=hahsojcaY228fM:&tbnh=96&tbnw=130&prev=/images%3Fq%3Ddetective%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=v0mnTcDwKaiU0QGXl-X5CAhttp://www.google.com/imgres?imgurl=http://cci-inspection.com/cci/images/stories/detective.jpg&imgrefurl=http://cci-inspection.com/cci/index.php%3Foption%3Dcom_content%26task%3Dview%26id%3D28%26Itemid%3D40&usg=__YGXglP0DcZrIs3rs15P6_20-pWQ=&h=362&w=490&sz=40&hl=en&start=1&sig2=qMGEMmOtr9jPpVHk2xFwEQ&zoom=1&itbs=1&tbnid=hahsojcaY228fM:&tbnh=96&tbnw=130&prev=/images%3Fq%3Ddetective%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=v0mnTcDwKaiU0QGXl-X5CAhttp://www.google.com/imgres?imgurl=http://cci-inspection.com/cci/images/stories/detective.jpg&imgrefurl=http://cci-inspection.com/cci/index.php%3Foption%3Dcom_content%26task%3Dview%26id%3D28%26Itemid%3D40&usg=__YGXglP0DcZrIs3rs15P6_20-pWQ=&h=362&w=490&sz=40&hl=en&start=1&sig2=qMGEMmOtr9jPpVHk2xFwEQ&zoom=1&itbs=1&tbnid=hahsojcaY228fM:&tbnh=96&tbnw=130&prev=/images%3Fq%3Ddetective%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=v0mnTcDwKaiU0QGXl-X5CA


29/51

PATRIOT ACT 314(b)

Section 314(b) provides for voluntary sharingof information with other financial institutions.A CU must complete a free registration

process. There is no requirement toparticipate in this program.
http://www.google.com/imgres?imgurl=http://www.cs.tau.ac.il/~erezalon/i/secret_pic.jpg&imgrefurl=http://www.cs.tau.ac.il/~erezalon/&usg=__IPNr-eWnwIXTOUA4q2S0VLJy6Tc=&h=257&w=415&sz=23&hl=en&start=3&sig2=Cczmgv8LSXdn5a0yHXuqGg&zoom=1&itbs=1&tbnid=7pD-2nWuo6zHSM:&tbnh=77&tbnw=125&prev=/images%3Fq%3DSecret%2Bsharers%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=feGtTf7SBM6SgQeB46D2DA


30/51

PATRIOT Act 326

Requires financial institutions to:

Implement reasonable procedures to verify the identity ofany person seeking to open an account.

Maintain records of the information used to verify thepersons identity.

Determine whether the person appears on any lists ofknown or suspected terrorists or terrorist organizationsprovided to the FI by any government agency.

Provide the consumer opening a new account with noticeof the information collection requirement.


31/51

PATRIOT Act 326 continued

At a minimum, must obtain and maintain records of the followingfor each new member:

Name

Date of birth (for individuals)

Address (physical address is required) Identification number

Social Security Number

Individual Tax Identification Number

Passport Number and Country of Issuance An Alien Identification Card Number

Number and Country of Issuance of any other foreigngovernment issued ID


32/51

Member Due Diligence

From the FFIEC BSA/AML Exam Manual:

"The cornerstone of a strong BSA/AMLprogramis adoption and implementation of comprehensive

MDD policies, procedures, and processes for allmembers, particularly those that present a higherrisk for money laundering or terrorist financing.The objectiveshould be to allow the credit union

the predict with relative certainty the types oftransactions the member is likely to engage.


33/51

Member Due Diligence

The concept of MDD begins with verifyingthe members identity and assessing the risksassociated with the member.

Processes should also include enhancedMDD for higher risk members and ongoingdue diligence for the entire membership.
http://www.google.com/imgres?imgurl=http://www.wired.com/images_blogs/photos/uncategorized/2008/03/26/polygraph.jpg&imgrefurl=http://www.wired.com/dangerroom/2008/03/iraqi-governmen/&usg=__KdIoa4Owqhu6UWX0DO1Qcb27QDY=&h=474&w=600&sz=35&hl=en&start=10&sig2=jB8Y3dn-LoOXL9fVTJhhAA&zoom=1&itbs=1&tbnid=C1O9TRsp6FFEZM:&tbnh=107&tbnw=135&prev=/images%3Fq%3DLie%2Bdetector%26hl%3Den%26sa%3DG%26gbv%3D2%26tbm%3Disch&ei=ju-tTdzXB8LUgQeVztSJDQ


34/51

Record Retention

BSA generally requires recordretention of 5 years from thedate of creation of the record

MIP (PATRIOT ACT 326)

requires Member name, address, date of

birth, ID number must be kept for 5years following the closing of theaccount

Documents relied upon to verifythe members identity must beretained for 5 years from the dateof the creation of the record

Records do not have to bephysical
http://www.google.com/imgres?imgurl=http://etc.usf.edu/clipart/13000/13089/file_cabinet_13089_md.gif&imgrefurl=http://etc.usf.edu/clipart/13000/13089/file_cabinet_13089.htm&usg=__WDTGKItfKywCCrAskBrqOuKfM2k=&h=350&w=256&sz=22&hl=en&start=61&sig2=Xh7OfmprDIHHgokBOwa9Mg&zoom=1&um=1&itbs=1&tbnid=mJkqrK97xGbYKM:&tbnh=120&tbnw=88&prev=/search%3Fq%3Dfiling%2Bcabinet%26start%3D60%26um%3D1%26hl%3Den%26sa%3DN%26gbv%3D2%26ndsp%3D20%26tbm%3Disch&ei=SfKtTZoIgdWBB4SR7fsM


35/51

Money Laundering

What is money laundering?

Moving dirty money (funds from illegalenterprises) through financial systems to disguise

the origin of the funds and make them appearlegal or clean.
http://www.google.com/imgres?imgurl=http://www.silverbearcafe.com/private/images/laundered-money.jpg&imgrefurl=http://www.silverbearcafe.com/private/launder.html&usg=__E1Gcit__Mekw8qMVdi9w8KzbkgE=&h=351&w=399&sz=91&hl=en&start=5&sig2=KLkNYHNxejcB75r0SJ9ATQ&zoom=1&itbs=1&tbnid=DyrBdTmZYSqX7M:&tbnh=109&tbnw=124&prev=/images%3Fq%3Dmoney%2Blaundering%26hl%3Den%26sa%3DG%26gbv%3D2%26tbm%3Disch&ei=K0enTYWYOKjW0QHr-aT5CA


36/51

The Stages of MoneyLaundering

Placement: Physically placing bulk cash proceeds.(e.g. making a deposit into a credit union account)

Layering: Separating the proceeds of criminalactivities from their origins through layers of complexfinancial transactions. (e.g. buying big ticket itemssuch as securities, cars, travel tickets often placed insomeone elses name to further distance thecriminal from the cash.)

Integration: Providing an apparent legitimateexplanation for the proceeds. (e.g. businessinvestments or transactions)


37/51

Money Laundering and YourCredit Union

Financial institutions are prime targets for moneylaunderers based on the many products andservices offered that can be used to facilitate allthree stages of money laundering.

Placement = deposit accounts (savings, money market,share certificates) Layering = purchase of monetary instruments for use in

purchasing big ticket items (money orders, cashierschecks, travelers checks) and using wire transfers to movemoney around the country and the world

Integration = cash used as down payment for real estate(loan obtained through credit union), investments insecurities offered through CUSOs, obtaining businessaccounts for front businesses


38/51

Money Laundering Red Flags

Refusal or reluctance to proceed with or abruptwithdrawal of a transaction after learning of CTRfiling

Refusal or reluctance to provide required informationor identification

Structured or recurring non-reportable transactions

Multiple transactions in even dollar amounts

Transactions structured to lose the paper trail Suspicious movement of funds between institutions

Non-local address
http://www.google.com/imgres?imgurl=http://liferants.files.wordpress.com/2008/04/red-flag1.jpg&imgrefurl=http://liferants.wordpress.com/2008/04/&usg=__Z_PrSBYjvnHEQPYdRoLTsaMk6jA=&h=467&w=480&sz=25&hl=en&start=17&sig2=PHuBvqKbFaEZB5pfV7ZFfg&zoom=1&itbs=1&tbnid=H4W0WWe6v-tyjM:&tbnh=126&tbnw=129&prev=/images%3Fq%3DRed%2BFlag%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=UeStTareJsLYgAfVic2MDQ


39/51

Money Laundering Red Flags

Multiple accounts for a single member

High activity volume with low balances

Share certificates used as collateral for loans

Loan payments by third parties Disbursement of loan proceeds by multiple credit

union checks

Replacement of monetary instruments (e.g.

purchasing travelers checks with a money order) Monetary instruments purchased with large amounts

of cash

Offi f F i A t
http://www.google.com/imgres?imgurl=http://www.pc1news.com/articles-img/small/red_flag.jpg&imgrefurl=http://www.pc1news.com/news/0240/federals-put-up-the-red-flag-for-identity-theft.html&usg=__FWhpTci-TaI5jx18918YPPCQIm8=&h=600&w=467&sz=38&hl=en&start=15&sig2=iXtmXfbP-ORuVZw2v2N-Vg&zoom=1&itbs=1&tbnid=wNThq5wZBxm7fM:&tbnh=135&tbnw=105&prev=/images%3Fq%3DRed%2BFlag%26hl%3Den%26gbv%3D2%26tbm%3Disch&ei=UeStTareJsLYgAfVic2MDQ


40/51

Office of Foreign AssetsControl (OFAC)

OFAC is a division of the U.S. TreasuryDepartment.

OFAC administers and enforces economicand trade sanctions based on U.S. foreignpolicy and national security goals againsttargeted foreign countries, terrorist,

international narcotics traffickers, and thoseengaged in activities related to theproliferation of weapons of mass destruction.


41/51

OFAC continued

OFAC can impose controls on transactionsand freeze foreign assets in U.S. jurisdiction.

In order to accomplish these goals OFAC has

compiled a number of lists of nationals andother entities with whom FIs are prohibitedfrom doing any sort of business.

Each OFAC enforced sanction has differentrestrictions as determined by the federalgovernment and often by order of thePresident.

C t OFAC S ti


42/51

Current OFAC SanctionPrograms

Balkans Related

Belarus

Burma

Cote dIvoire

Counter NarcoticsTrafficking

Counter Terrorism

Cuba

Democratic Republic ofCongo

Diamond Trading

Iran

Iraq Related

Former Liberian Regime ofCharles Taylor

Lebanon

Libya Non Proliferation

Somalia

Sudan

Syria Zimbabwe


43/51

OFAC continued

Non-compliance with OFAC sanctions canresult in personal penalties of up to$1,000,000 or 12 years in jail!
http://www.google.com/imgres?imgurl=http://farm2.static.flickr.com/1079/946760395_f8a05cfee1.jpg&imgrefurl=http://www.flickr.com/photos/10350347%40N06/favorites/page27/%3Fview%3Dsm&usg=__LKprrkcTfaC_uv7kMFb_wjs1hA0=&h=375&w=500&sz=159&hl=en&start=42&sig2=8fGpRT5K7_WjUV1OSpJ-_A&zoom=1&itbs=1&tbnid=s5YCwtjEdOAccM:&tbnh=98&tbnw=130&prev=/images%3Fq%3Dmoving%2Bpugs%26start%3D40%26hl%3Den%26sa%3DN%26gbv%3D2%26ndsp%3D20%26tbm%3Disch&ei=pa6kTeDxOY_pgQf50IS6CAhttp://www.google.com/imgres?imgurl=http://img145.imageshack.us/img145/5153/pugvt8.jpg&imgrefurl=http://arbroath.blogspot.com/2006/09/four-legged-deputys-first-bust-catches.html&usg=__ULC3F8jltKBoFwFUYrcEMcMSU_8=&h=245&w=325&sz=21&hl=en&start=31&sig2=gRlqf67ObSo8bg30hlH8aw&zoom=1&itbs=1&tbnid=9P0Pd7EV0XKa7M:&tbnh=89&tbnw=118&prev=/images%3Fq%3Dpug%2Bdetective%26start%3D20%26hl%3Den%26sa%3DN%26gbv%3D2%26ndsp%3D20%26tbm%3Disch&ei=0kinTfyIObCN0QGcurT5CA


44/51

How to Stay Outof Trouble

Include OFAC compliance in your BSA/AMLprogram

Checks the names of payees for all Cashiers

Checks and Wire Transfers against the OFACmaster list(s).

All new account applicants are checked against themaster list(s) prior to providing services.

The entire membership is checked against theOFAC master list(s) periodically, or as frequently asthe list(s) are updated.
http://www.google.com/imgres?imgurl=http://img145.imageshack.us/img145/5153/pugvt8.jpg&imgrefurl=http://arbroath.blogspot.com/2006/09/four-legged-deputys-first-bust-catches.html&usg=__ULC3F8jltKBoFwFUYrcEMcMSU_8=&h=245&w=325&sz=21&hl=en&start=31&sig2=gRlqf67ObSo8bg30hlH8aw&zoom=1&itbs=1&tbnid=9P0Pd7EV0XKa7M:&tbnh=89&tbnw=118&prev=/images%3Fq%3Dpug%2Bdetective%26start%3D20%26hl%3Den%26sa%3DN%26gbv%3D2%26ndsp%3D20%26tbm%3Disch&ei=0kinTfyIObCN0QGcurT5CA


45/51

Recent Developments

Trends & Changes in BankSecrecy Act and Anti-Money

Laundering Regulations,

Requirements, and Procedures


46/51

BSA Rules Get New Home

BSA formerly lived at 31 CFR 103

As of March 1, 2011 can now be found at 31CFR Chapter X New CTR and SAR forms are required

No substantive change to the forms or filingprocedure. The only update is to code citations in theinstructions.

For info on the change go to fincen.gov NO CHANGE TO FILING REQUIREMENTS

OR METHODS

N D t Fi ld P d f


47/51

New Data Fields Proposed forCTR and DOEP

Technical changes were proposed to bothforms, with a comment period that endedMarch 28th.

The changes are made to support FinCENsmove to all electronic processing.


48/51

SAR Confidentiality Rules

New guidance allows SAR informationsharing with domestic affiliates provided thatthe affiliate is also subject to SAR filing

requirements, is linked to the filing entity bycommon ownership and is not itself thesubject of the SAR.

BSA &M L d i i


49/51

BSA &Money Laundering inthe News

Former Speaker of the House Tom DeLay convicted on moneylaundering and conspiracy charges. Sentenced to three years inprison

Utah bank official charged with money laundering for acceptingpayments from online gambling companies to processtransactions

South Korean police say they've arrested a farmer for allegedlyhiding about $10 million in cash in a garlic field. Police say hisrelatives made the money by running an illegal Internet gamblingsite.

Digital currency, stored value cards, internet gambling, virtual lifeall possible avenues for money laundering


50/51

Summary

BSA Requirements Board approved policy

Annual risk assessment

Annual training

BSA Officer Annual independent review

Non-compliance penalties?

Record retention?

CTR filing limit?

CTR timing?

SAR filing reasons? Insider abuseany $$

$5,000 when suspect idd

$25,000 w/o suspect

Computer intrusion Money Laundering,

Terrorist Financing, BSAavoidance

SAR timing?

SAR Sharing? MIP minimums?

OFAC?


51/51

The End

Contact: Jason [email protected]
http://www.google.com/imgres?imgurl=http://carrotsncake.com/wp-content/uploads/2010/07/IMG_00184.jpg&imgrefurl=http://carrotsncake.com/2010/07/adventures-working-from-home.html&usg=___aoR6ajViZE9-rpFvv9Me812HTc=&h=480&w=360&sz=62&hl=en&start=139&sig2=Nr8baSAdlx07SaNmTYf50g&zoom=1&itbs=1&tbnid=RQOnt3pyVz3O-M:&tbnh=129&tbnw=97&prev=/images%3Fq%3Dmoving%2Bpugs%26start%3D120%26hl%3Den%26sa%3DN%26gbv%3D2%26ndsp%3D20%26tbm%3Disch&ei=ra-kTZmiF9GdgQfK86nCCA